Invest NI has enjoyed great success but is now at a critical stage in its evolution

Invest NI has enjoyed great success but is now at a critical stage in its evolution

BelfastTelegraph.co.uk

By the standards set in the Programme for Government, Invest NI is enjoying a very successful period. By the basic yardsticks, the last two years have been exceptional. It is appropriate now to ask about the sources of success and also to ask whether there is an opportunity to upgrade the expectations.

By the standards set in the Programme for Government, Invest NI is enjoying a very successful period. By the basic yardsticks, the last two years have been exceptional. It is appropriate now to ask about the sources of success and also to ask whether there is an opportunity to upgrade the expectations.

Success lies partly in the improving skills and techniques of Invest NI. In part, recent successes also stem from the stronger UK and Irish economies which, indirectly, have contributed to local developments.

Invest NI has a budget of over £150m each year: could that budget now be reduced or partially redirected? The targets set in the corporate plan for the period 2011-15 will probably be exceeded by a handsome margin. Looking back, those targets were set when the recovery from the recession had yet to be fully appreciated. They did seem ambitious.

In the year to March 2014, Invest NI promoted 10,800 jobs. Of course, jobs promoted are not necessarily jobs created but, in terms of expectations, actual job creation will follow eventually, even with at a slightly lower outcome.

In the somewhat artificial distinction that is being used, 4,462 of the jobs are classified as helping to rebalance the economy and 6,338 are helping to rebuild the economy. Within the further subdivisions, the disappointing category is that only 1,765 jobs were in new start-up businesses. This was over 20% below the plan target and now becomes of particular interest when the responsibility for new start-ups transfers to local government next year.

Statistically, the Jobs Fund, introduced three years ago, has been most successful: 4,462 jobs, or 60% more than the plan target last year.

Invest NI is now at a critical stage in its evolution.

From mid-2014, the EU-wide rules on State Aid for investors became more restrictive. The ceiling on financial capital assistance is now applied more restrictively to large companies that already have a local organisation. State Aid rules mean that investment grants are allowed only when a new investment is being made for a product or service that has not already been assisted. Follow-on investments will be excluded unless the project is in a different product or service area.

Invest NI, through its parent department, is asking the EU for some (so far unspecified) flexibility in applying the new rules but answers have not yet been obtained. There is a hope that they may be given later this year.

In an ideal setting, the performance of Invest NI might be judged by an assessment of how much, because of Invest NI assistance, Invest NI clients were adding to local economic activity, or the increment to GVA each year. Conceptually, that is difficult to measure and disaggregate from other influences.

Pragmatically, while searching for difficult measures of economic outcomes, the best proxy for the impact of Invest NI may lie in the way in which it uses its resources to incentivise business developments. Selective schemes to encourage research and development (with follow-up by some assessment of R&D implementation) are a logical addition. Invest NI has already introduced a skills growth programme which is being used in parallel with the assured skills assistance scheme financed by the Department for Employment and Learning.

In addition, an export development scheme has been prepared and is due for announcement shortly. Supply chain initiatives are a more difficult concept but, for small businesses, should be important.

These supplementary incentive schemes would have the potential to create a stronger leverage impact on potential new investors.

If, as seems probable, the debate on corporation tax reform will now be delayed, an alternative injection of extra dynamic through leveraged and targeted performance incentives may be helpful as the speed of economic recovery slows.

Invest NI has been performing better than official targets. These imaginative further incentives have a part to play in doing even better.